On Oct. 1, President Bush signed the College Cost Reduction and Access Act of 2007 which will increase funding for Federal Pell Grants by more than $11 billion and cut the interest rate for Stafford loans in half.
The Federal Pell Grant is awarded to low-income students to ensure their access to a college education, and because it is a grant, students do not need to pay it back.
Currently the maximum amount eligible students can receive from the Pell grant is $4,310. By 2008 the maximum amount will increase by $490, by 2010 it will increase by $690 and by 2012 it will increase by $1,090, bringing the total maximum award to $5,400. That’s nearly enough to pay for one whole semester of college at SDSU.
“I think it’s great that the government is helping college kids out because most students already have enough debt to deal with,” Tricia Langholdt, a senior psychology and childhood development major said.
The act will cut the interest rate of the Stafford loan in half. The current rate is 6.8%, and by 2008 it will be reduced to 6%, in 2009 it will be 5.6%, in 2010 it will be 4.5% and finally in 2011 it will be at 3.4%
These cuts will only apply to loans taken out on or after the dates mentioned. If a student graduated and is in the process of paying back a Stafford Loan, their interest rate will remain the same as it was when they borrowed the money.
The Stafford loan is an unsubsidized Federal loan, which means that the government pays the interest while the student is in school. The Stafford Loan and the Pell Grant are both applied for when a student fills out the Free Application for Federal Student Aid (FAFSA).
“The College Cost Reduction & Access Act is a positive thing for students,” Jay Larsen, the financial aid director at SDSU, said. “Eligible students will receive higher amounts of money and more students will be eligible to receive government assistance.”
In addition to increasing funding for Pell Grants and reducing the interest rate on Stafford Loans, the act also “eases the burden on our men and women in uniform,” President George W. Bush said in a news release. Soldiers on active duty will be able to defer payments on their loans, and when they return home they can now defer payments for over a year.
The College Cost Reduction & Access Act of 2007 is good for students but not for the private student lending market. Since the government is offering to give eligible students more money, those students won’t need as much help from other lenders.
Nathan Anderson from the Student Loan Finance Corporation in Aberdeen, S.D., said, “It will force consolidation of the private student lending market.”
The College Cost Reduction & Access Act of 2007 will increase funding for Federal Pell Grants, reduce the interest rate for Federal Stafford Loans and provide flexibility in payment options for the men and women of the armed forces. It is one step closer to making college education accessible to everyone.